Indirect Tax Laws · Refund

Refund in Special Cases: Drawback and Other Provisions (CA Final Customs)

Updated 5 October 2026

Special-case customs relief returns duty in situations where normal refund rules do not fit: defective or non-conforming imports, short-landed or lost goods, unclaimed goods sold by Customs, and re-export of duty-paid goods. To solve a question, identify the situation, test its conditions, then choose refund or drawback and compute the amount.

Understand Refund in Special Cases: Drawback and Other Provisions

A normal customs refund is for duty that was paid but was not payable, or was paid in excess. You file a claim, prove the facts, and the claim passes the unjust enrichment test. Special cases are different. The duty was properly paid on the facts at the time, but later events make it unfair to keep the money.

The common later events are these. The goods turn out defective or not as per specification. The goods are short-landed, lost or destroyed before clearance. The goods are abandoned or left unclaimed and Customs sells them. Or the importer re-exports goods on which duty was paid. Each event has its own provision, and each has its own conditions.

Drawback is a separate idea. It is a repayment of duty linked to export. It covers duty paid on imported goods that are re-exported as they are, and duty suffered on imported or excisable materials used in goods that are exported. It works through prescribed rates and rules, not through proving that duty was wrongly paid. IGST on exports is refunded through its own route and is not part of drawback.

So the key question is always: why is the money coming back? If duty was not payable or was excess, it is a refund. If goods were defective, lost or abandoned, it is a special-case relief. If goods are being exported, it is drawback. Examiners use this classification to set traps, so make it your first step.

Key rules to remember

Refund vs remission vs drawback: Refund (Section 27) = duty paid that was not payable or was paid in excess. Relief on non-conforming imports (Section 26A) = refund of import duty on goods not as per specification that are returned. Remission (Section 23) = duty not payable on goods lost or destroyed before clearance. Drawback = repayment of duty because goods are exported.; A refund claim under Section 27 is made by application within a time limit and is tested for unjust enrichment. Relief under Section 26A is for non-conforming imports and has its own conditions. Remission means no duty is collected on the lost goods at all. Drawback follows prescribed rules and rates linked to export.
Relief for defective or non-conforming imports (Section 26A): Refund of import duty is claimed under Section 26A if goods are not as per specification AND not worked, repaired or used after import (except as needed to test) AND returned to the supplier, exported, or destroyed or abandoned to Government at no cost to it, as permitted.; Apply within the time limit and on the conditions of the refund provisions. Learn each condition as a separate test. Section 26A deals with refund of import duty on defective goods or goods not conforming to specification. For refund of export duty on goods returned, see Section 26. Keep Section 27 for general refund claims.
Goods lost, destroyed or abandoned before clearance (Section 23): Section 23(1): duty is remitted on goods lost or destroyed, by natural causes or accident, at any time before clearance for home consumption, as ascertained by the proper officer. Section 23(2): the owner may abandon goods before an order for clearance is made and then pay no duty, but not goods in respect of which an offence is pending.; The timing is the test: the event must occur before clearance for home consumption. Abandonment must come before the order for clearance. This is remission of duty, not a refund.
Unclaimed goods (Section 48): Goods not cleared within 30 days after unloading (or such further time as the proper officer allows) can be sold after notice, with the permission of the proper officer. Sale proceeds first meet duty, charges, expenses and other dues; the balance goes to the owner on claim.; The 30-day period (or the extended period) must have run before the sale. The sale needs the proper officer's permission. The owner is entitled only to the balance. Customs recovers its dues first.
Drawback on re-export of duty-paid imported goods (Section 74): Drawback = percentage of duty paid, as fixed by the Re-export of Imported Goods (Drawback of Customs Duties) Rules, 1995. The percentage falls as the period of use before export increases. For use up to one month, the Rules' table gives 95%, subject to the exceptions in the Rules for certain categories of goods.; The goods must be identified as the ones imported and be examined by the officer at export. Section 74 normally requires re-export within two years from the order permitting clearance, and this period can be extended. In exam questions, use the percentage given for the period of use.
Drawback on materials used in exported goods: Drawback = rate fixed by the Government (All Industry Rate) or a Brand Rate fixed on application, applied to the export value or the prescribed base; The rate is notified by the Government. You will not be asked to recall rates, only to apply the one given.

How to solve Refund in Special Cases: Drawback and Other Provisions questions

Use this method for any case question on special-case refund, relief or drawback. It keeps your answer in provision-facts-conclusion form.

1Read the facts and mark the event: defect, short landing, loss, abandonment, unclaimed sale, re-export or use in export goods.
2Mark the stage of the goods: before or after the order for clearance for home consumption. The stage decides which provision applies.
3State the provision in plain words, such as relief for defective goods, remission for loss, drawback on re-export, or sale of unclaimed goods.
4Test every condition against the facts: unused, identifiable, exported or destroyed as permitted, time limit met, officer's examination done.
5Check the time limit and whether the facts show a delay or an extension.
6Compute the amount if numbers are given: the duty paid, the drawback percentage, and any deduction for use or for sale proceeds.
7Apply the unjust enrichment test where the relief is a general refund of duty under Section 27 whose burden may have been passed on.
8Write a clear conclusion: relief allowed, partly allowed or denied, with the amount and the reason.

Quickest way: Why-is-money-coming-back sort

When to use it: Use it in MCQs and short case questions where you have two or three minutes.

Ask one question: why is the money coming back?
If the answer is excess or wrongly paid duty, think general refund claim and unjust enrichment.
If the answer is defective, lost or abandoned goods, think special relief and test the timing and conditions.
If the answer is export or re-export, think drawback and check the identity of the goods, the use and the time of export.
Apply the percentage or the sale-proceeds order and give the conclusion in one line.

Common mistakes in Refund in Special Cases: Drawback and Other Provisions

Treating drawback and refund as the same thing.
Both return money from Customs, so they feel alike.
Fix: Remember the trigger. Refund (Section 27) follows duty that was not payable or was excess. Relief on non-conforming imports (Section 26A) follows goods that are not as per specification and are returned. Remission (Section 23) means duty is not payable on goods lost or destroyed before clearance. Drawback follows export and does not need duty to have been wrongly paid.
Allowing relief for defective goods even though the importer used them.
Students focus on the defect and forget the condition on use.
Fix: Check that the goods were not worked, repaired or used, except for testing. If they were used, the relief is not available.
Giving the owner the full sale proceeds of unclaimed goods.
Students forget that Customs has first claim on the proceeds.
Fix: Apply the order: duty, charges and expenses first, then pay the balance to the owner on claim.
Granting remission for loss or destruction that happened after clearance.
Students ignore the stage of the goods.
Fix: Relief for lost or destroyed goods applies only before clearance for home consumption. After clearance, the importer bears the loss.
Giving 100% drawback, or one flat percentage, on re-export of duty-paid goods.
Students assume that all the duty comes back, or that the percentage does not depend on how long the goods were used.
Fix: Under Section 74 and the 1995 Rules, the percentage of duty returned falls as the period of use before export increases. Use the percentage given in the question, or the Rules' percentage for the period of use.
Including IGST refund on exports inside drawback.
Both relate to exports.
Fix: Keep them separate. Drawback covers customs and related duties. IGST on exports is refunded through the GST route.

Worked examples

Example 1

Case: Vidhya Traders imported a consignment of machine parts and paid import duty of ₹4,00,000. On opening, the parts were found not to match the contract specification. The parts were kept sealed and unused. The importer exported them back to the supplier with Customs permission and applied within the prescribed time. Is a refund available?

Show the solution

Event: goods are not as per specification, after clearance for home consumption.
Provision: refund of import duty on non-conforming goods that are returned, claimed under Section 26A.
Condition 1: the goods do not conform to specification. This is met.
Condition 2: the goods were not worked, repaired or used. They were kept sealed and unused, so this is met.
Condition 3: the goods were exported with permission, one of the allowed courses of action. This is met.
Condition 4: the application was made within the prescribed time. This is met.

Answer: Yes. Vidhya Traders can claim a refund of the import duty of ₹4,00,000 under Section 26A, because all the conditions for the defective-goods relief are met.

Exam tips

Start every case answer by naming the trigger: defect, loss, abandonment, unclaimed sale or re-export. Marks follow the correct classification.
Write each condition as a short line with a tick against the facts. Examiners award marks per condition tested.
When the question asks for the difference between refund and drawback, give three points: trigger, basis of amount, and procedure or time limit.
In MCQs, watch for the stage of the goods (before or after clearance) and whether the goods were used. These two facts usually decide the answer.
On re-export drawback, check the period of use before export. The percentage of duty returned falls as the use period grows. Use the percentage given in the question. Do not invent other percentages.

Practice questions from Refund

Refund in Special Cases: Drawback and Other Provisions: frequently asked questions

What is the difference between refund and drawback in customs?

A refund returns duty that was paid but not payable, was excess, or qualifies for relief such as defective goods. Drawback repays duty because the goods are exported, either as re-exported imports or as materials used in exports. A general refund claim is tested for unjust enrichment, while drawback follows rules and rates.

Can I get a refund of import duty on defective goods?

Yes. The refund is claimed under Section 26A, if the goods are not as per specification, were not worked, repaired or used, and were returned to the supplier, exported, or destroyed or abandoned to the Government as permitted. You must apply within the time limit and meet the conditions of the refund provisions. If the conditions fail, the relief is denied. Section 26 is different: it deals with refund of export duty on goods returned.

Is duty refundable on goods that are re-exported?

Duty on duty-paid imported goods that are re-exported is returned as drawback under Section 74, not as a refund. The Re-export of Imported Goods (Drawback of Customs Duties) Rules, 1995 give drawback as a percentage of the duty paid, and the percentage falls as the period of use before export increases. The goods must be identified and examined at export, and re-export is normally required within two years, which can be extended.

What happens to unclaimed imported goods?

If goods are not cleared within 30 days after unloading, or such further time as the proper officer allows, Customs can sell them under Section 48 after notice, with the permission of the proper officer. The sale proceeds first meet duty, charges, expenses and other dues, and the owner can claim the balance. The owner cannot claim more than that balance.